The below chart shows the labour force participation rate for those of prime working age (15 to 64 years) and the working age population (all those aged over 15). The difference between the two rates can be described as the ageing effect.

When the difference between the two rates increases, this can be explained by an increasing ageing population. From around 2010, the gap between the two rates started to widen, co-inciding with the time that the first of the Baby Boomers starting reaching retirement age, indicative of an ageing effect on the working age population labour force participation rate.

However, since around 2012, both the labour force participation rates of the prime working age population and the working age population have declined considerably which can not be explained by an ageing effect. The decline suggests that the primary reason for the most recent drop in the labour force participation rates is due to cyclical factors such as poor economic performance and people losing confidence in finding employment - therefore withdrawing from the labour force.

Additional explainers for the ageing effect include a preference of employers to employ younger workers, particularly in tough economic times, as well as an increase in confidence of older people to retire given that superannuation performance has returned to pre-GFC levels. Regardless, while the gap between the two labour force participation rates has only increased marginally in recent times, it can be expected to continue, and even increase, given that there are now more people of labour market exit age than entry age in Tasmania. When a return to positive economic performance occurs, it is likely that Tasmania's labour force participation rates will remain relatively low, compared with other states and territories) giving the accelerated rate of ageing in the state.